Work and Non-Pathological Gambling

Most economists believe that people would value an additional $1,000 in income more if they were poor than if rich, but if so, people should not gamble according to standard expected utility theory. Thus, economists have been challenged to explain the pervasiveness of gambling in human behavior. A recently proposed solution to this theoretical challenge (Nyman 2004; Nyman et al. in Journal of Socio-Economics 37:2492-2504, 2008) suggests that, because having to work for one's income is a fact of life in market economies, many individuals view the winnings from gambling not only as additional income, but as additional income for which one does not need to work. As a result, individuals, and especially those who are disadvantaged in the labor market, attach a utility premium to gambling winnings and gamble because of that. This utility premium would explain the pervasiveness of gambling in society, especially among the economically disadvantaged. This paper reviews the economic approaches to explaining non-pathological gambling, presents an overview of the new theory, and uses data from the National Epidemiological Survey of Alcohol and Related Conditions from 2001 to test it. The results indicate that the respondent's work characteristics explain the decision to gamble in a way that is consistent with theory.